The morning session at SAP Ariba/SAP Fieldglass ValueX left us with some thoughts from the big consulting firms about the way procurement, and indeed business, should and will go in the coming years if we are to survive the pace of technological change the world is experiencing, and adapt our processes to respect our planet. We believe the presentations will be available to read in full, so to give a snapshot:
The keynote called for a reboot of capitalism and (the environment), championed by John Penrose MP.
Deloitte was quick to follow with a look at Industry 4 (automation, data exchange, cyber-physical systems (CPS), the internet of things (IoT), industrial internet of things (IIOT), cloud computing, cognitive computing and artificial intelligence and so on) in the context of procurement. They reminded us that the fourth industrial revolution is not, however, just about a collection of technologies, rather how you package and use them altogether to support your long-term business strategy. A global Deloitte survey revealed that 94% (of respondents) saw implementing digital tech and processes (aka digital transformation) as a means just to ‘keep up’ with the rest of the marketplace. Their ability to use the data that comes out of it in real time to aid real growth is lacking, and that is the paradox. So the call to action was: Do not see digitisation as a defence mechanism!
PWC talked about the disruption that is coming from the megatrends of climate change and resource scarcity, social change, accelerating urbanisation, shifts in economic power and tech breakthroughs, and that what really matters is how they will collide, not how they will affect us on their own. And it’s how we adapt that will define how we survive: for example, water shortage in Mexico has affected Heineken production, so the industry responds with looking at ways to recycle water, decreasing their dependence on it by 30%. Rapid urbanisation growth is expected to see billions of people in megacities in the next 20 years or so, bringing huge opportunities for economic development. Cyber risk is becoming more and more of a threat: the US navy responds by going back to teaching navigation, not by tech, but by the stars.
So for procurement these ‘megatrends’ will mean that risk management will have to be hard-wired into everything we do. Two-thirds of the CEOs PWC spoke to said they were changing their sourcing strategies in response to concerns about global trends, especially climate change. One example of seizing opportunities from these trends is seen in SE England, where good quality champagne can now be produced because it has a similar climate to the growing region of France of the 1980s. (We’re not suggesting that compensates for the other effects of climate change – the point is we must adapt and seize the opportunities out of upheaval.)
A snapshot of procurement and its readiness told us that 16% of CPOs don’t have a clear vision or road map to transform their function; 45% of firms are adjusting their supply chain and sourcing strategies, 43% of CPOs are unable to drive meaningful insight form their procurement data due to poor quality and lack of trust; 41% or organisations say making workforce decisions using analytics is important – but they don’t do it. And new skills are needed, 71% of CPOs will increase the amount of contractors they use in two years. They reminded us there will be an increasing need to use data and AI to find the future value opportunities.
Accenture followed calling for procurement to have a change of mindset – from the ‘suppliers versus us’ scenario and a compliance- and process-driven approach – to take advantage of the huge opportunities for collaboration. In a new procurement structure we would have 360 degree relationships with suppliers, customers and buyers, because we are all part of a big ecosystem. Transformation in whatever form it takes cannot be run like a project as part of the day job. If we are serious about it, we need to dedicate a workforce to it, as we need to repurpose for the future and with that comes co-innovation and enablement. Alongside that we need to support the supply base, with diversity comes innovation, and they see lot of benefit coming from SMEs in terms of sustainability.
The morning culminated in a very engaging panel session on spend transformation to enable a circular economy from Tifenn Dano-Kwan, CMO, SAP Ariba & SAP Fieldglass, Stephen Jamieson, Head of Sustainability EMEA, SAP, Sian Sutherland, CEO, A Plastic Planet, Kevin Vyse, Circular Economy Expert, Government Advisor and Dr Peter Maddox, Head of Government Programmes, WRAP. They focused on our depleating resources, and how we need to source responsibly. The circular economy is addressing that with reuse of materials, and seeing the value in what we call waste. But business and government must come together to design policy. We need to go back to making products that don’t have to leave the economy. Products for longevity. Of course the challenge is how we can make money from that system!
On plastics, they said, while it’s in the news a lot, it’s as recoverable as anything else: ‘so long as you can trace it, you can recapture its value,’ which was another nod to transparency, a theme we heard about in the IBM session earlier. But Plastic Planet reminded us that despite efforts like cutting down on plastic bag usage in the UK for example, the amount of plastic waste is not decreasing. 4.1 billion plastic bags are still being used.
If recycling is the answer, where is all the plastic going to go? We know the toxicity of burning it. So we shouldn’t treat it like rubbish: we still export more than 60% of our plastic waste mainly to third -world countries. But, the public are disempowered. It’s not a shopper problem it’s a production problem – people will buy what they are sold. Big businesses must ignite the fire for change.
And there are many big businesses trying to do that. Although one of the largest polluters, Unilever has ambitious targets, and is looking at how to remove the unnecessary purchases. For example, rather than buying a can of deodorant, is there a means to buy just the bit we use, the deodorant, so we wouldn’t need to throw away the whole can. So we must think about what exactly it is we want to buy, and work with suppliers that can deliver it, because they are out there.
This theme of circular production, circular use, circular life, ran through the whole event. SAP has long been looking at how we stimulate the move from linear supply chains to circular ones. But, they are not unrealistic: first, we have to get own house in order, they said. Each year the firm publishes a financial report with sustainable metrics at molecular level. And it is employing its rich Ariba Network to help tackle the sustainability problem: challenging the economies of secondary materials by connecting those industries with people who can innovate with them; working with customers to give them insight on their impact on the environment and unlocking their marketplace to help channel recycled plastic to a new recycle market.
The call was to be prepared, because legislation cometh.